Jet Airways to go under insolvency.
The National Company Law Tribunal on Thursday admitted lenders move for bankruptcy proceedings for Jet Airways. A consortium of 26 bankers led by State Bank had taken the grounded Jet Airways to the NCLT to recover their dues of over Rs 8,500 crore.
The announcement came hours after stocks of the grounded airlines surged a whopping 146 per cent today in intra-day trading, leading to the Bombay Stock Exchange seeking clarification from the company.
Jet Airways, started over 25 years ago by airline-ticketing-agent-turned-entrepreneur Naresh Goyal, stopped flying on April 17 after it ran out of cash and the unpaid lessors took away most of its 100-odd operational airplanes.
The lenders have been trying to sell the airline as a going concern since the past five months but failed due to many a reason.
Apart from banks, the airline also owes over Rs 10,000 crore to its hundreds of vendors, primarily aircraft lessors and over Rs 3,000 crore to around 23,000 employees who have not been paid since March.
The airline has been having negative net worth for long and has run a loss of over Rs 13,000 crore in the past few years. Thus it has over Rs 36,500 crore of dues and being a services company negligible assets to recover.
Also, most of its domestic airport slots have been given away to other airlines by the government and so are some of its slots at some key international airports.
On the airplane asset side, Jet had only 16 on its book which are valued around Rs 5,000 crore as per some media reports, as the rest of its 123 fleet were on lease and most of them have been de-registered or taken away by the foreign lessors already.
Following a meeting of the lenders Monday, SBI had said that “after due deliberations, the lenders have decided to seek resolution for Jet Airways under the bankruptcy code since only a conditional bid was received”.
The statement further said the move was necessitated as the prospective investor (a consortium of Etihad Airways and Hinduja group) wants some Sebi exemptions waiving the open offer requirement, which can be worked out better under the bankruptcy laws.
Two operational creditors–Shaman Wheels and Gaggar Enterprises– had already taken the airline to the NCLT on June 10. The airline owes Rs 8.74 crore to Shaman Wheels and Rs 53 lakh to Gaggar Enterprises.
As the cash crisis worsened and lenders refused any lifeline to the airline under promoter chairman Goyal, who was forced to give up control on March 25, when lenders had in principle agreed to infuse Rs 1,500 crore for equity.
But that never materialized, as bankers were chary of the fate of the February 12 circular of the RBI which was being heard at the Supreme Court. Finally, on April 2, the apex court struck down the contentious circular, sealing the bank- led the process to resolve the crisis at the airline.
With the March 25 resolution, Etihad’s 24 percent stake was halved and it lost its board representation as well along with Naresh Goyal and his wife Anita.
Finally, the airline was grounded on April 17, leaving over 23,000 employees unpaid for months in the lurch, and also sending airfares soaring by over 40 percent on average.
It can be noted that on April 8 through 12, bankers had put the airline on sale-offering 33 to 75 percent stake-of which the lenders own 51 percent now-to interested parties and received four preliminary bids and had planned to close the sale process by May 30.